Skift Take

Restructuring won't be easy, and the process of paying off its latest debts won't be helped by numbers like the $1 billion hit from fuel hedging contracts. There's a long road ahead for the group.

Lufthansa has pledged a wide-ranging restructuring, from job cuts to sales of non-core assets, as it seeks to repay a $10.1 billion state bailout and navigate deepening losses in the face of the coronavirus pandemic.

The pledged cost cuts came as the German carrier posted a first-quarter net loss of $2.35 billion on Wednesday, only days after securing the bailout that is intended to help the airline ride out the crisis but will require it to cede some of its prized landing slots to rivals.

“In view of the very slow recovery in demand, we must now take far-reaching restructuring measures,” said CEO Carsten Spohr.

Get the Latest on Coronavirus and the Travel Industry on Skift’s Liveblog

The group, which includes Swiss, Austrian Airlines and Brussels Airlines, is bracing for a significant decline in 2020 earnings and has begun talks with labour representatives over cutbacks, the company added.

Brussels Airlines will reduce its fleet by 30 percent and its workforce by 25 percent while Austrian Airlines’ fleet and personnel costs are to be cut by 20 percent.

The sale of non-core operations is also on the cards in the medium term, the group said, having postponed the planned sale of parts of airline caterer LSG in March.

The first-quarter loss, which widened from $383 million a year earlier, was driven by writedowns of $298 million on its fleet. There were also writedowns on the book value of LSG North America and budget carrier Eurowings, of $112 million and $64 million respectively.

A slump in fuel hedging contracts was another $1 billion burden on the bottom line.

Shares in the group were up 3 percent in early trade, though analysts expect the national carrier to be removed from Germany’s benchmark blue-chip DAX for the first time since the index was launched in 1988.

Lufthansa’s April passenger numbers slumped 98 percent year-on-year to 241,000, but it laid out plans on Wednesday to increase capacity in September to reach 40 percent of what it had scheduled before the pandemic.

(Reporting by Ludwig Burger. Editing by Carmel Crimmins and David Goodman )

This article was written by Ludwig Burger from Reuters and was legally licensed through the NewsCred publisher network. Please direct all licensing questions to [email protected].


The Daily Newsletter

Our daily coverage of the global travel industry. Written by editors and analysts from across Skift’s brands.

Have a confidential tip for Skift? Get in touch

Tags: austrian airlines, brussels airlines, coronavirus, eurowings, luftansa, swiss

Photo credit: Lufthansa's April passenger numbers slumped 98 percent year-on-year to 241,000. Alan Angelats / Unsplash

Up Next

Loading next stories